Supreme Court Says Banks Must Compensate Cyber Fraud Victims if Found Negligent

The Supreme Court on Friday stressed that financial institutions must face strict liability if their negligence in exercising due diligence enables customers to fall victim to digital arrest scams or cyber fraud.

A bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V. Mohana was hearing a suo motu case concerning the rising incidents of digital arrest scams across the country.

During the hearing, Attorney General R. Venkataramani informed the Court that several measures had been undertaken to tackle the growing menace. He also submitted that the Reserve Bank of India (RBI) was considering regulatory measures, which are likely to be operationalised by December.

However, the bench questioned the delay in introducing these measures after Senior Advocate N. S. Nappinai, appointed as amicus curiae, highlighted that digital arrest scams continued unabated despite the Court taking cognisance of the issue and issuing several directions. The latest reported incident had occurred just a week earlier.

The Court questioned why the RBI was still consulting banks on the matter despite the continuing threat posed by such frauds.

On Thursday, Chief Justice Surya Kant had also taken a strong stance against those accused of targeting senior citizens through digital arrest scams, observing that such ruthless criminals deserved stringent punishment, even before trial, if permitted by law.

The proceedings highlight the growing judicial concern over digital arrest scams and the need for stronger safeguards, accountability and regulatory action to protect vulnerable citizens from cybercriminals.